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How German retailer Metro multiplied its China web sales by 30

April 15, 2016 06:00 AM

German retailer Metro Group began opening stores in China in 1996 and started selling online there four years ago. But it’s been in the last several months that online sales have really taken off, growing 30 times in the six months from last September compared to the same period last year, says Tao Yuan, Metro China’s e-commerce director.

That growth comes in part from better cross-channel integration, such as allowing consumers to buy online and pick up in its 82 stores, and having those store fulfill online orders. That has helped increase sales sevenfold on its China e-commerce site, MetroMall.cn, during that period, Tao says. Metro declined to disclose its online sales in China in dollars.

The other big driver of growth has been a new storefront on Tmall Global, the online shopping mall operated by Alibaba Group Holding Ltd. that features imported goods.

China’s e-commerce market is evolving quickly, and retailers have to adapt just as quickly to succeed, Tao says. “Metro started its online business in China four years ago and we have tested many business models, including operating a stand-alone company e-commerce site and working with neighborhood e-retailers. Now we found the best way is to connect our e-commerce business with stores in order to jump into the market quickly while keeping control of costs,” Tao tells Internet Retailer.

In China, neighborhood e-retailers refers to e-retailers that specialized in operating small warehouses or store networks in densely populated areas in order to deliver products quickly to consumers.

Metro initially operated its e-commerce site, MetroMall.cn, separately from its stores. But Metro last year took steps to break down the barriers between its online and offline channels.

“Our stores now act as fulfillment centers. Consumers need to select a nearby store before they shop on MetroMall.cn. The selected store will process the orders and ship the products if consumers can’t pick them up in the store,” Tao says. “We also offer free shipping for orders above 200 yuan ($30.10).”

The retailer also has taken steps to ensure that store managers don’t fear competition from the company’s online initiatives. “To avoid the conflict between offline and online, Metro doesn’t use online sales to evaluate e-commerce performance. Instead, we compare the total sales, from both offline and online, of each store,” Tao says, “Now the workers in each store are extremely welcoming to the e-commerce team as we are the people who can help them boost their sales.”

Metro also began selling last year on Tmall Global, a web shopping mall for imported products operated by Alibaba Group Holding Ltd., China’s leading e-commerce company in terms of online sales.

“E-commerce is never an easy business, especially for a store chain like us. We need to know more about online, while Alibaba wants to learn retail best practices from us. Last year, Metro became a top-level strategic partners with Alibaba, meaning we could receive the maximum support from Alibaba, such as more traffic. Currently, fewer than 10 companies have that level of partnership with Alibaba,” Tao says.

Thanks to the strong demand for overseas products and China’s relaxed cross-border e-commerce policies in recent years, Metro found a huge online demand for imported products online and began to test the water. The retailer mostly sells its own brands, such as snack brand Fine Food and milk brand Aka. The Metro storefront on Tmall Global also sells products from other parts of the world, such as U.S.-sourced nuts from the Wonderful Company and Evian, the French bottled water company.

Sales spiked on Singles’ Day, a big day of online sales every Nov. 11 in China. “We sold out 2.35 million liters of imported milk via our store on Tmall Global during 2015 Singles’ Day, showing how Chinese consumers trust the quality of our products,” Tao says. “In contrast, our 82 stores needed several months to sell the same amount of products.” On Singles’ Day last year merchants generated $14.32 billion in sales on Alibaba’s online marketplaces.

Metro is planning to open a section in all its stores to showcase samples of products from Tmall Global. Consumers can scan the code on each product using a scanner or with their mobile phone to learn more about the products. “Store shoppers will buy more products after they see the online products pages, especially after seeing the larger number of positive reviews from our 300,000 online consumers at Tmall Global,” Tao says.

There are growing pains for the German retailer as its online business takes off in China. “The biggest challenge is the shortage of highly qualified e-commerce professionals.” Tao says, “We are planning to open a training center, working with Alibaba. Metro’s employees, from executives to store workers, will receive e-commerce training there.”

For a full report on the opportunities for foreign brands to sell online into China, read “Open Door Policy,” which appears in the November 2015 issue of Internet Retailer magazine.